If a Market Solution Provides Greater Marginal Social Benefits Than

question 224

Multiple Choice

If a market solution provides greater marginal social benefits than marginal social costs, then:

• A) a positive externality is present.
• B) a negative externality is present.
• C) no net externality is present.
• D) any externality has already been internalized.

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in the production process, used as a measure in calculating labor costs and efficiency.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate manufacturing overhead costs to products based on a selected activity base.

Manufacturing Overhead

All manufacturing costs that are not directly tied to the production of goods, such as rent, utilities, and salaries of maintenance personnel.

Total Manufacturing Cost

The aggregate of all costs directly attributable to the production of goods, including material, labor, and overhead costs.